The offer was widely expected to be rejected by the board, which had hired Goldman Sachs as its financial adviser. KT&G has also embarked on a three-week road show in an effort to corral support for the current management from international investors.

In a written statement, Kwak Young-Kyoon, KT&G's chief executive, defended the company's current strategy and described Icahn's bid as "as conditional and lacking any certainty as to structure, timing, financing or future plans for the company."

"The company believes that it can best maximize shareholder value by continuing to implement the strategic, operational and financial initiatives currently under way and contemplated for the future," KT&G's statement added.

Icahn and hedge fund Steel Partners II LP, managed by Warren Lichtenstein, had proposed last week to buy Korea's biggest tobacco company for 60,000 won ($62.14) a share, or about $10 billion. That represented a 17% premium on the stock at the time.

Lichtenstein said the investment group had opted for a hostile takeover after earlier attempts to encourage organizational reforms that would boost shareholder value were rejected by the KT&G board.

Those reforms had included the disposal of unrelated real estate assets and unprofitable business lines.

The Icahn group said it offered to commit $2 billion of its own capital to the bid, but it was unclear where it would raise additional capital.

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